MISC 15-000377

December 15, 2015

Suffolk, ss.

FOSTER, J.

MEMORANDUM AND ORDER DENYING DEFENDANT'S MOTION TO DISMISS

Froio Management Group, Inc. (Froio) and Bargain Discount Markets, Inc. (BDM) lease adjacent commercial properties from Washington Street Enterprises, LLC (WSE). Froio and WSE are related entities, and seek a declaration of the application of a right of first refusal held by Froio to BDMs option to purchase its leased property. BDM has moved to dismiss on the grounds that there is no current actual controversy between the parties and that this action is not ripe. While the question is close, the court finds that the complaint alleges facts sufficient to set forth an actual controversy between the parties that is ripe for review.

Procedural History

Froio and WSE filed their complaint on September 21, 2015. BDM filed the Defendants Motion to Dismiss (Memorandum of Law Incorporated) (Motion to Dismiss and Def.s Memo), the Concise Statement of Material Facts, and the Record Appendix in Connection with the Defendant, Bargain Discount Markets, Inc.s, Motion to Dismiss on October 19, 2015. Froio and WSE filed their Opposition to Motion to Dismiss (Pl.s Opp.) and their Responses to Concise Statement of Material Facts (Additional Facts) on November 19, 2015. The Motion to Dismiss was heard on November 24, 2015 and taken under advisement. This Memorandum and Order follows.

Standard

The Motion to Dismiss seeks dismissal of the complaint under Mass. R. Civ. P. 12(b)(6), for failure to state a claim upon which relief can be granted, and Mass. R. Civ. P. 12(b)(1), for lack of subject matter jurisdiction. In considering a motion to dismiss for failure to state a claim, the court accepts as true well-pleaded factual allegations and reasonable inferences drawn therefrom, Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43 , 45 (2004), but does not accept legal conclusions cast in the form of factual allegations. Schaer v. Brandeis Univ., 432 Mass. 474 , 477 (2000); see Iannacchino v. Ford Motor Co., 451 Mass. 623 , 633 (2008). Generally, if matters outside the pleadings are presented to and not excluded by the court, the motion will be treated as a motion for summary judgment. Mass. R. Civ. P. 12(b), 12(c). The court may, however, take into account matters of public record and documents integral to, referred to, or explicitly relied on in the complaint, whether or not attached, without converting the motion to a motion for summary judgment. Marram, 442 Mass. at 45 n.4; Schaer, 432 Mass. at 477; Reliance Ins. Co. v. City of Boston, 71 Mass. App. Ct. 550 , 555 (2008); Shuel v. DeIeso, 16 LCR 329 , 329 n.2 (2008).

In considering a motion to dismiss for lack of subject matter jurisdiction, the court may either consider matters and documents outside the pleadings without converting the motion to one for summary judgment or, considering the same materials, convert the motion to dismiss into a motion for summary judgment. Bell v. Zoning Bd. of Appeals of Gloucester, 429 Mass. 551 , 555 (1999), abrogated on other grounds by Jepson v. Zoning Bd. of Appeals of Ipswich, 450 Mass. 81 (2007); Watros v. Greater Lynn Mental Health & Retardation Assn, Inc., 421 Mass. 106 , 108-109 (1995).

Though BDM moved to dismiss pursuant to both Mass. R. Civ. P. 12(b)(6) and 12(b)(1), the only documents outside the pleadings that it submitted with the Motion to Dismiss are two printouts from the Secretary of State website relating to the corporate information for Froio and WSE. Given that these materials are matters of public record relating to the corporate status of the plaintiffs, the court will not convert the Motion to Dismiss to one for summary judgment, but rather treat the entire Motion to Dismiss under the standard for motions to dismiss for failure to state a claim.

Facts

For the purposes of the Motion to Dismiss only, the court accepts as true the following facts as alleged in the complaint.

1. WSE is a Massachusetts limited liability company with a principal place of business at 960 Turnpike Street, Suite 3B, Canton Massachusetts. WSE is the owner of real property located at 80, 90, and 100 Washington Street, Dorchester, Massachusetts (collectively, the Property), which it purchased on or about February 5, 2013. Compl. ¶ 3, Concise Statement of Material Facts (Concise Statement) ¶ 3.

4. BDM is a Massachusetts corporation with a principal place of business at 290 Broadway, Chelsea, Massachusetts. Pursuant to a lease with Dunn River, dated March 27, 2009 (BDM Lease), BDM leases the premises at 80-90 Washington Street (BDM Premises). The Froio Premises and the BDM Premises are adjacent to each other. Compl. ¶¶ 6-8, Ex. B; Concise Statement ¶ 2.

5. WSE claims to be the successor landlord to Dunn River. At the time it took title to the Property, WSE was assigned the prior owners rights in certain leases on the Property, including the Froio Lease, which continues until the year 2031, and the BDM Lease, which runs until March 27, 2019. Compl. ¶¶ 4, 9; Concise Statement ¶¶ 10-11.

6. Section 10.11 of the Froio Lease states that Froio has a right of first refusal to purchase the Property:

Landlord [WSE] agrees that during the term of this Lease and any extensions hereof, it will not sell the Dunn River Office Center or any portion thereof to any third person or entity of any type . . . unless, in the case of an unsolicited offer where the Landlord has not previously notified Tenant [Froio] of Landlords intention to actively market the sale of the Dunn River Office Center: (i) Landlord has received a bona fide offer to purchase the same; (ii) Landlord has given Tenant written notice stating the name and address of the offeror and all terms and conditions of said offer, and containing an offer by Landlord to Tenant to sell the same upon the same terms and conditions.

Compl. ¶ 16 & Ex. A, p. 15; Concise Statement ¶¶ 4-5.

7. Section 14.13 of the BDM Lease contains an option to purchase the BDM Premises which provides:

During the Ninth and Tenth Year of the Lease [March 27, 2017-March 27, 2018 (9th Year) and March 27, 2018-March 27, 2019 (10th Year)], the Tenant [BDM] shall have the option to purchase the Building and Related Premises [at 80-90 Washington Street] for the greater of the following two amounts: (a) Ten Million Dollars ($10,000,000), or (b) appraised value pursuant to an agreed upon appraisal process described in Exhibit B to this Lease. This option is subject to a right of first refusal to purchase the entire parcel of land owned by the Landlord (including the Subject Premises [80-90 Washington Street]) and which right of first refusal is held by the Tenant of the Burger King restaurant [Froio] located adjacent to the Premises.

8. WSE is now actively planning to develop the Property, including the portion of the Property occupied by BDM. WSE has been informed it will take six to nine months to identify developers or credit tenants for the Property, and once having done so, it will take as much as twenty-four (24) months to develop final plans and obtain permitting for any definitive and development project that would be shovel ready when the BDM Lease expires in 2019. Compl. ¶¶10; Additional Facts ¶¶ 2-3.

9. In connection with this process, WSEs counsel contacted BDMs counsel on several occasions in the spring and early summer of 2015 to discuss BDMs interest in either: (i) renewing its lease or (ii) leasing a smaller space in the anticipated development of 80-90 Washington Street. Counsel for WSE also interviewed various commercial real estate brokers to represent WSE in its effort to identify its options for development of the Property and identify potential development partners or credit tenants for the Property. Compl. ¶ 11; Additional Facts ¶¶ 4-6.

10. On August 7, 2010, counsel for BDM notified counsel for WSE that At present [BDM] is planning on exercising [its] option to purchase the entire premises pursuant to Section 14.13 of the current lease when it ripens on or about March 27, 2017. Compl. ¶ 12 & Ex. D.

11. On August 13, 2015, WSEs counsel responded to the letter sent by BDMs counsel, requesting that counsel for BDM confirm in writing on or before August 31, 2015, that it acknowledged that BDMs rights to purchase the BDM premises were subordinate to Froios rights to purchase the BDM premises. Compl. ¶ 13 & Ex. E.

BDM maintains that because it cannot exercise its option until March 27, 2017, at the earliest, there is no actual controversy between BDM and the plaintiffs, an essential element of a claim for declaratory judgment. Therefore, BDM argues, Froio and WSE have failed to state a claim upon which relief can be granted under Mass. R. Civ. P. 12(b)(6). BDM further asserts that Froio and WSE lack standing under Mass. R. Civ. P. 12(b)(1) because their claim is not yet ripe for review. Froio and WSE argue that there is an actual controversy over Froios right of first refusal because BDM has not given the acknowledgement WSE sought after BDM indicated it intended to exercise its option in 2017. This, they argue, is impeding WSEs ability to undertake development plans. As discussed below, there are sufficient facts pled in the complaint to show an actual controversy between the parties that is ripe for review.

An actual controversy is a real dispute caused by the assertion by one party of a legal relation, status, or right in which he has a definite interest, and the denial of such assertion by another party also having a definite interest in the subject matter, where the circumstances attending the dispute plainly indicate that unless the matter is adjusted such antagonistic claims will almost immediately and inevitably lead to litigation. Bunker Hill Distrib., Inc. v. District Attorney for Suffolk County, 376 Mass. 142 , 144 (1978), quoting School Comm. of Cambridge v. Superintendent of Sch. of Cambridge, 320 Mass. 516 , 518 (1946) (internal quotations omitted). The actual controversy must be one which would sufficiently survive a motion to dismiss, Massachusetts Assn of Indep. Ins. Agents & Brokers, Inc. v. Commissioner of Ins., 373 Mass. 290 , 292 (1977), and may be present whether or not the plaintiffs rights have already been impaired. District Attorney for the Suffolk Dist., 381 Mass. at 659; School Comm. of Cambridge, 320 Mass. at 518. To have standing for purposes of G.L. c. 231A, a plaintiff must have a definite interest in the matters in contention in the sense that his rights will be significantly affected by a resolution of the contested point. Bonan v. City of Boston, 398 Mass. 315 , 320 (1986).

Chapter 231A is remedial in nature and is to be liberally construed. G.L. c. 231A, § 9. The purpose of both the actual controversy and the standing requirements is to ensure the effectuation of the statutory purpose of G.L. c. 231A, which is to enable a court to afford relief from . . . uncertainty and insecurity with respect to rights, duties, status, and other legal obligations. Galipault v. Wash Rock Invs., LLC, 65 Mass. App. Ct. 73 , 85 (2005), quoting G.L. c. 231A, § 9; see Sahli, 437 Mass. at 705. Declaratory judgment proceedings are concerned with the resolution of real, not hypothetical, controversies; the declaration issued is intended to have an immediate impact on the rights of the parties. Mass. Assn of Indep. Ins. Agents & Brokers, Inc., 373 Mass. at 292-293.

B. Actual Controversy

BDM argues that no actual controversy will arise between the parties as to the effectiveness of Froios right of first refusal unless and until: (i) BDM conclusively decides to exercise its option to purchase under its lease, and (ii) Froio conclusively decides to exercise the right of first refusal under its lease. Def.s Memo, at 6. Specifically, BDM asserts that because these hypothetical events cannot happen until March 27, 2017, there is at present no live controversy between the parties. Plaintiffs argue that there is such a controversy because: (a) they have asserted a legal right in which they have a definite interest, i.e. the right of first refusal; (b) BDM refuses to acknowledge this interest despite WSEs clear request for acknowledgement; and (c) this will inevitably lead to litigation because of WSEs plan to develop the Property. Pl.s Opp., at 6-7.

BDMs argument focuses on contingencies that may influence BDMs choice to exercise its option or Froios subsequent decision to exercise its right of first refusal. It stresses these events may never actually occur. Def.s Memo, at 6-7. Whether the parties choose to exercise their respective rights in the future is a different question than whether such rights exist in the first place. Froio and WSE seek a declaration on the latter, narrower issue, namely, whether Froio has a valid right of first refusal to purchase the BDM Premises.

Case law sheds light on whether this narrower issue of the right of first refusal and BDMs declining to respond to WSEs inquiry constitutes an actual controversy. In Bunker Hill Distrib., Inc. v. District Attorney for Suffolk County, 376 Mass. 142 (1978), the court held there was no actual controversy where a plaintiff film distributor sought declaratory judgment on whether its film, which contained scenes of explicit sexual congress, was obscene under relevant Massachusetts law. Id. at 143-145. Because the film had not yet been exhibited or distributed and the District Attorney took no position on its obscenity nor threatened plaintiff with prosecution, id. at 144, the issue was insufficient and too general for an actual controversy; rather, the plaintiff was seeking only an advisory opinion. Id. at 145; see Bonan v. City of Boston, 398 Mass. 315 , 316-17, 320-322 (1986) (holding no actual controversy where plaintiff developers sought declaratory judgment that provision of zoning ordinance improperly influenced zoning commission but plaintiffs made only general allegations and lacked sufficient facts showing they were injured or threatened with injury because of the provision).

On the other hand, in Town of Oxford v. Oxford Water Co., 391 Mass. 581 (1984), the court held there was an actual controversy requiring declaratory judgment as to the proper method for calculating the purchase price of a water company. Id. at 584-585. The plaintiff town argued there was an actual controversy between the parties over the meaning of certain statutory terms and whether the town had certain rights, such as assuming bonds, as part of the purchase price. Id. at 582. The defendant argued the town had to commit to purchasing the company before a declaratory judgment was appropriate, i.e., before it knew what the price was. Id. at 584. The court noted that [i]t is not necessary that the parties be irrevocably bound to a course of action before a court can afford declaratory relief. Id., citing LaCouture v. Retirement Bd. of Quincy, 11 Mass. App. 738, 744-745 (1981). The court further stated: The purpose of the declaratory judgment procedure is to remove uncertainty. In this case, it will enable the parties to deal intelligently with the situation before them, to agree between themselves as far as possible, and to reduce as much as possible the area of future litigation. Id. at 585, quoting Cohasset Water Co. v. Cohasset, 321 Mass. 137 , 149 (1947).

Taking the complaints factual allegations as true, as required on a motion to dismiss, there is an actual controversy between the parties. The Froio Lease contains a right of first refusal; the BDM Lease contains an option subject to a prior right of first refusal. WSE asked BDM if it intended to exercise that option; BDM replied that at present it intended to exercise it in 2017. Recognizing that WSE and Froio are separate entities but commonly owned, WSE then sought acknowledgement from BDM that BDMs option was subject to Froios right of first refusal, so that WSE could proceed with development plans which could take up to 33 months to complete. BDM declined to make that acknowledgement. WSE has been actively planning to develop the Property and negotiated an agreement with a commercial real estate broker, who declined to execute it because of the uncertainty surrounding the right of first refusal. Thus, Froio and WSE have asserted that Froio holds a right of first refusal over BDMs option, and BDM has failed to acknowledge that right. WSE sought express acknowledgement, and has alleged that it is actively engaging in development plans and has already run into issues because of the uncertainty around the right of first refusal. Any doubt left open regarding Froios alleged right of first refusal will likely lead to future litigation if no declaratory judgment is issued.

In this way, the situation alleged in the complaint differs from that in Bunker Hill, where the plaintiff had not taken any action to distribute or exhibit the film. Bunker Hill, 376 Mass. at 142. Here, WSE has actively engaged in development plans and expressly asked BDM whether it intended to use its option. Though BDM was not required to respond, it did. When WSE further asked for acknowledgement, BDM failed to respond, leaving the status of the parties rights uncertain as they move forward. This case more akin to Town of Oxford, where the town calculated what it deemed to be the purchase price, the defendant declined the offer as inadequate, and the parties did not agree on how to calculate it. BDMs argument that no actual controversy exists until BDM and Froio conclusively exercise their option and right of first refusal, respectively, conflicts with the principle that parties need not be irrevocably bound to a course of action to obtain declaratory judgment. Town of Oxford, 391 Mass. at 584. The Town of Oxford plaintiff did not have to firmly commit to purchasing the water company before it was entitled to a declaration on how the price was to be calculated. Likewise, the parties here do not have to conclusively commit to exercising their rights in 2017 to entitle Froio and WSE to a declaration on what their rights are under the respective documents with respect to the right of first refusal. A declaratory judgment would allow them to deal intelligently with the situation before them. Id. at 585.

While it is a close question, the court is mindful that the actual controversy requirement should be construed broadly and the plaintiffs rights do not have to actually be impaired before a declaratory judgment may issue. G.L. c. 231A, § 9; District Attorney for the Suffolk Dist., 381 Mass. at 659. The complaint alleges sufficient facts to meet the actual controversy requirement.

C. Standing and Ripeness

Meeting the actual controversy requirement is not the end of the inquiry. Where there is an actual controversy, a plaintiff must have standing to secure its resolution. Bello v. South Shore Hospital, 384 Mass. 770 , 778 (1981); Massachusetts Assn of Indep. Ins. Agents & Brokers, Inc., 373 Mass. at 292-293. The question of whether an actual controversy exists is closely related to the question of standing. Bello, 384 Mass. at 778. Standing to pursue a declaratory judgment claim requires that the plaintiff have a definite interest in the matters in contention such that the declaration would have a significant impact on its rights by resolving the contested issue. Bonan, 398 Mass. at 320; see Bello, 384 Mass. at 777-779 (no standing for declaring judgment construing hospital bylaws where plaintiff physicians were not members of hospital corporation, but just applicants); Galipault, 65 Mass. App. Ct. at 84 (no standing for declaratory judgment that condo owners had right of first refusal to purchase other units where court found they did not own right of first refusal nor had any other interest in it);.

Here, both plaintiffs have standing. Froio has a definite, concrete interest in the resolution of the contested point in that it is the owner of the right of first refusal to purchase the BDM Premises under Section 10.11 of the Froio Lease. WSE has a definite, concrete interest, as the declaration it seeks immediately affects its ability to develop the Property, which is currently on hold due to the open question of the right of first refusal and its application to BDM. A declaratory judgment would have a significant impact on both Froio and WSE.

The more difficult question BDM raises is whether this action is ripe for review. Ripeness is the time dimension[] of standing. McInnis-Misenor v. Maine Med. Ctr., 319 F.3d 63, 69 (1st Cir. 2003). It essentially focuses on the when of litigation, as opposed to the who. Id. Even if plaintiffs have standing (i.e. the appropriate who), the question of when remains. Id. at 69-70. The ripeness doctrines purpose is to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements. Abbot Lab. v. Gardner, 387 U.S. 136, 148 (1967), abrogated on other grounds by Califano v. Sanders, 430 U.S. 99 (1977). Courts apply a two-part test to determine ripeness, looking to (i) the fitness of the issue for judicial decision and (ii) the extent to which withholding judgment will impose hardship. Id. at 149; Roman Catholic Bishop of Springfield v. City of Springfield, 724 F.3d 78, 89 (1st Cir. 2013); Massachusetts Assn of Afro-American Police, Inc. v. Boston Police Dept., 973 F.2d 18, 20 (1st Cir. 1992). Both prongs must be met, though a weak showing (i) on one may be compensated by a strong showing on another. Stern v. U.S. Dist. Court for Dist. of Mass., 214 F.3d 4, 10 (1st Cir. 2000); Ernst & Young v. Depositors Economic Protection Corp., 45 F.3d 530, 535 (1st Cir. 1995). The court addresses whether the plaintiffs meet each prong in turn.

i. Fitness of the Issue

Under the fitness prong, courts focus on subsidiary queries concerning finality, definiteness, and the extent to which resolution of the challenge depends upon facts that may not yet be sufficiently developed. Ernst & Young, 45 F.3d at 535. The critical question is whether a claim involves uncertain and contingent events that may not occur as anticipated, or indeed may not occur at all. Massachusetts Assn of Afro-American Police, Inc., 973 F.2d at 20; see McInnis-Misenor, 319 F.3d at 72. The point is to avoid deciding hypothetical questions. However, the raw fact that events have not fully unfolded is not always fatal to justiciability. In such straitened circumstances, courts sometimes exhibit a greater willingness to decide cases that turn on legal issues not likely to be significantly affected by further factual development. Ernst & Young, 45 F. 3d at 536, citing Pacific Gas & Elec. Co. v. State Energy Resources Conservation & Dev. Commn, 461 U.S. 190, 201 (1983).

The issue raised in the complaint is fit for judicial review. BDM argues that there are contingencies that may never happen, making resolution of the right of first refusal question unfit for judicial review. See Ernst & Young, 45 F.3d at 538 (issue not ripe for review because no less than eight (8) contingent events had to occur first before any harm would come to E&Y under the statute, such that claim depend[ed] on serendipitous events that may not occur as anticipatedor may not occur at all). Froio and WSE, however, raise a largely legal question that, it appears, will not benefit from much further factual development. See Stern, 214 F.3d at 11 (holding challenge to local court rule was ripe for review where rule imposed new substantive and procedural rules on attorneys and deciding the question appeared unavoidable); compare Roman Catholic Bishop of Springfield, 724 F.3d at 91-92 (holding churchs claims based on its inability to make changes to church in light of new ordinance were not fit for review where plaintiff filed suit the day after ordinance took effect and did not demonstrate that defendant city commission would not allow certain changes if plaintiff submitted plans, etc. which would require factual development). The court can answer the question necessary for declaratory judgment largely on the documents submitted, whether BDM exercises its option or not.

ii. Hardship to the Parties

This prong centers on the direct and immediate dilemma for the parties that results from withholding judicial review. Ernst & Young, 45. F. 3d at 535; see Stern, 214 F.3d at 11. Generally, a mere possibility of future injury, unless it is the cause of some present detriment, does not constitute hardship. Sindicato Puertorriqueno de Trabajadores, SEIU Local 1996 v. Fortuno, 699 F.3d 1, 9 (1st Cir. 2012) (per curiam), quoting Simmonds v. INS, 326 F.3d 351, 360 (1st Cir. 2003); see Roman Catholic Bishop of Springfield, 724 F.3d at 90. In assessing hardship, the court focuses on a judgments usefulness: rather than asking negatively, whether denying relief would impose hardship, courts will do well to ask, in a more positive vein, whether granting relief would serve a useful purpose, or, put another way, whether the sought-after declaration would be of practical assistance in setting the underlying controversy to rest. Verizon New England, Inc. v. International Bhd. of Elec. Workers, Local No. 2322, 651 F.3d 176, 188 (1st Cir. 2011) (citations omitted).

BDM argues that Froios and WSEs concerns over harm to development plans or the fact that WSE has already incurred attorneys fees are not present injuries . . . because the earliest that Plaintiffs could ever realize any harm would not be until March 27, 2017. Def.s Memo, at 9. BDM further argues that if the contingent 2017 events do occur, a court could timely resolve this case then and that Froio and WSE will have plenty of time to utilize that agreement and finish any development plan before March 2019, when the BDM Lease expires. Id. This overlooks the complaints allegationstaken as truethat it takes potentially 33 months to be shovel ready, and the fact that WSE has already incurred fees in engaging in active development plans which have been halted because of the uncertainty surrounding the right of first refusal.

Additionally, given that it may take 33 months to complete development plans and that BDM has until March 2019 to decide if it will exercise its option, failure to resolve this question at present may expose Froio and WSE to a scenario where BDM declines to exercise the option in 2019, leaving WSE without tenants or permits and having to start a lengthy development plan from scratch. The lengthy process required to be shovel-ready means that any delay may seriously prejudice them. The hardship prong weighs towards Froio and WSE. A declaratory judgment will resolve the question and minimize any harm to Froio and WSE while allowing all parties to proceed with certainty when making their decision in 2017-2019.

The parties do not address any positive vein component of the hardship prong. However, resolution of the right of first refusal issue would be useful to all parties involved. BDM would be able to make the decision whether to exercise its option knowing full well whether it was subordinate to Froios right of first refusal. Froio and WSE would be able to proceed with development plans, knowing whether Froio does in fact have a right of first refusal and whether WSE would be hindered in its plans if BDM were to exercise its option. Froios and WSEs declaratory judgment claim is ripe for resolution.

Conclusion

Though this case presents a close call, particularly on the actual controversy requirement, the facts alleged in the complaint demonstrate an actual controversyi.e. the uncertainty of the validity of the right of first refusalthat is currently ripe for review. The Motion to Dismiss is DENIED. BDMs answer is due within twenty days after the date of this Memorandum and Order. [Note 1] A case management conference is set down for January 19, 2016 at 11:00 am.

SO ORDERED

FOOTNOTES

[Note 1] In this Memorandum and Order, the court has accepted the facts alleged in the complaint as true for the purposes of the Motion to Dismiss only. It has not adjudicated any of these facts. In its answer, BDM is free to admit or deny any of the factual allegations of the complaint and assert affirmative defenses as it sees fit.